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India country brief

Political overview

System of government

The Republic of India is a constitutional democracy made up of 28 states and seven union and national territories. The Constitution came into force on 26 January 1950 and lists the powers of the Federal Government (known as 'the Centre' or 'Union Government'), those of the states, and those which are shared responsibilities. The President of India is obliged to act on the advice of the Council of Ministers, chosen by the Prime Minister.

Parliament is bicameral, comprising the 545-member Lok Sabha ('people's' or lower house) and the 245-member RajyaSabha ('states' or upper house). Lok Sabha members are elected by universal adult suffrage every five years (except for two nominated Anglo-Indian members) using the 'first past the post' voting system. The Rajya Sabha is not subject to dissolution; one-third of its members retire every second year.

Recent political developments

Following the 2009 Indian national election for the Lok Sabha (lower house) the Congress Party-led United Progressive Alliance (UPA) formed the new government. The Congress Party itself won 206 seats, up from 153 in the 2004 national election. The main opposition party, the Hindu nationalist Bharatiya Janata Party (BJP), won 116 seats. Dr Manmohan Singh, Prime Minister from 2004, was reappointed Prime Minister on 20 May 2009. Dr Singh is the first Indian Prime Minister to be re-elected after serving a full first term of five years since Prime Minister Jawaharlal Nehru in 1961. Parliament reconvened on 1 June 2009.

Six million officials and security personnel were involved in delivering the elections, and close to one-and-a-half million electronic voting machines were used. Over 400 million Indians, almost 60 per cent of eligible voters, cast their votes, out of an estimated electorate of 714 million. 14 million young voters participated for the first time (one quarter of India's electorate is aged under 25). This was the biggest electoral exercise in the history of the democratic world.

Elections for the Rajya Sabha (upper-house) are not held concurrently with Lok Sabha elections. One-third of RajyaSabha members are elected every two years by the legislative assemblies of the Indian states.

Foreign relations

India's foreign policy has traditionally reflected a broad national consensus on security and foreign relations. Since independence in 1947, India has sought to position itself as a major international player. It has been at the forefront of developing country activism and was a founding member of the Non-Aligned Movement (NAM). India has also been an active member of the United Nations and the Commonwealth and has expanded its cooperation with East Asia, including Association of South East Asian Nations (ASEAN) countries and as a member of the East Asia Summit (EAS).

As its economic power develops, India is seeking to consolidate further its international role and to increase its focus on 'economic diplomacy', particularly to secure energy supplies. In terms of its international role, India is lobbying for a permanent seat on the United Nations Security Council (a claim which Australia supports) and taking a more prominent role in fora such as the World Trade Organization and the G20.

India is the major power in South Asia and its relations with its neighbours govern the tenor of foreign relations in the region. India's major strategic focus has traditionally been on its neighbourhood although more recently it has sought to broaden this focus, notably towards East Asia.

'Look East' policy

Like Australia, India is pursuing a combined multilateral, regional and bilateral approach to trade policy through its 'Look East' policy with Asia.

In late 1995, India was granted full dialogue partner status with ASEAN and was admitted as a member of the ASEAN Regional Forum in July 1996. India, together with Australia and New Zealand, is also a member of the East Asia Summit.

Indian Ocean Rim Association for Regional Cooperation (IOR-ARC)

In November 2011, India became Chair and Australia Vice-Chair of the Indian Ocean Rim Association for Regional Cooperation (IOR-ARC). The two countries will work closely together to address challenges facing the Indian Ocean Region.

The Association, the apex pan-Indian Ocean multilateral forum, focuses on more effective practical cooperation in the six priority areas of maritime security and piracy; fisheries management; disaster risk reduction; tourism and cultural exchanges; academic and science and technology cooperation; and trade and investment facilitation; which were identified by the member countries in the 11th meeting of Council of Ministers held in Bengaluru, in 2011.

Relations with the United States

The development of the India-United States relationship in recent years has been driven by increasing recognition, in both India and the United States, of each country's strategic and economic importance to the other. The importance of India to the United States was underscored in October 2008 with the signing of a bilateral nuclear agreement enabling civil nuclear trade between the two countries. The United States and India have also been expanding cooperation in a range of other areas, including through a CEO Forum, cooperation in agriculture, infrastructure, supply-chain management, and partnerships in public health.

Relations with China

India has extensive land borders with China, strong memories of the short border war with China in 1962, and is conscious of China's links with Burma and Pakistan. Despite this, in recent years India has sought to develop friendly and pragmatic relations with China. China is now India's largest trading partner. The two countries have also made progress in recent years in addressing border disputes, although the issue remains sensitive, particularly in relation to the north eastern Indian State of Arunachal Pradesh. In 2009 China was India's largest source of merchandise imports, and third largest destination for merchandise exports.

Relations with Pakistan

India's relationship with Pakistan has been problematic since the time of partition at the end of British rule in 1947. Their ongoing territorial dispute over Kashmir, in India's northwest is a serious obstacle to normal relations between the two neighbours.

Following the then Prime Minister Vajpayee's 'hand of friendship' overture to Pakistan in April 2003, both countries normalised diplomatic relations, implemented a ceasefire along the Line of Control (LOC), and re-established some transport links. (The LOC is the military control line between the Indian and Pakistani-controlled parts of the former princely state of Jammu and Kashmir.) In February 2004, the two sides agreed on a process for discussions to resolve key issues, called the Composite Dialogue, which has been continued by the current UPA Government.

Following this 2004 agreement, there have been several successful bilateral meetings designed to build confidence and make progress on negotiations. Despite the peace process, however, violence continues in Kashmir.

India's relations with Pakistan were again put under strain following the November 2008 Mumbai attacks in which over 160 were killed, including two Australians.

Economic overview

The Indian economy comprises a wide spectrum of activity, ranging from high technology to subsistence agriculture. After decades of failing to realise its full economic potential, India has been one of the world's fastest growing large economies in recent decades, although growth has slowed in recent years.

While selective economic reform was attempted from as early as 1960, the reform process began in earnest in 1991 due to a balance of payments and foreign currency reserve crisis. This reform process has focused on liberalising the economy through increased openness to financial and technology transfers, reform of the financial sector, trade liberalisation and reduced government administrative controls. The structure of the economy has changed over the past decade, with services playing an increasingly important role. This demonstrates the difference between India's services-led economic growth and the manufacturing-led development model followed in much of East Asia, including China. However, the Indian Government recognises that India will have to generate stronger manufacturing growth and power generation to continue its current levels of economic performance.

Despite recent progress, significant challenges remain, including addressing the fiscal deficit, high inflation rates and government debt, and improving infrastructure and agricultural productivity. Another challenge is to ensure that the benefits of economic growth are experienced more widely. Despite the fact that tens of millions have been lifted out of poverty during the 1990s, average incomes and literacy levels remain low and India is one of the largest recipients of World Bank lending. While still low, India's score in the United Nations Human Development Index (HDI) has increased over recent decades. India's HDI ranking was 134th in 2011.

While the impact of the global financial crisis on India was less than others, India has been affected by falls in global trade volumes.

Key economic indicators

India's GDP grew by 7.1 per cent in 2011. The Treasury, in the Mid-Year Economic and Fiscal Outlook (MYEFO) 2012-13, forecasts GDP growth of 5½ per cent in 2012, 7 per cent in 2013 and 7½ per cent in 2014. India's economic growth is forecast to be lower than expected at Budget, particularly for 2012, reflecting a slowing in investment and a delay in monsoon conditions. Over the remainder of the forecast horizon, India's growth is expected to improve, reflecting a gradual recovery in private investment and a return to normal seasonal conditions. Reforms introduced in 2012 to open up key sectors to foreign investment and cut certain subsidies are expected to help boost sentiment in the medium term.

Inflation remains high, with the IMF expecting consumer price inflation to reach 10.3 per cent in 2012, up from 8.9 per cent in 2011, before easing to 9.6 per cent in 2013. Inflation is widespread and generalised, with high food prices a key driver.

Key downside risks to the outlook include headwinds from economic and financial weakness in the global economy, a large fiscal deficit crowding out private investment, an elevated current account deficit posing risks for financial stability and a weak rupee fuelling imported inflation.

Bilateral relationship

Australia has placed India in the front rank of its international partnerships. Both Governments recognise there is significant potential for further cooperation across a broad range of areas and in 2009 agreed to categorise the relationship as a strategic partnership.

Australia and India first established diplomatic relations in the pre-Independence period, when the Consulate General of India was first opened as a Trade Office in Sydney in 1941. India's first High Commissioner to Australia arrived in Canberra in 1945. In March 1944, Lieutenant-General Iven Mackay was appointed as Australia's first High Commissioner to India.

Strategic partnership

Then Prime Minister Kevin Rudd visited India on 11-13 November 2009. He and Indian Prime Minister, Dr Manmohan Singh, issued a joint statement that included agreement to upgrade relations between the two countries to the level of a "Strategic Partnership." As part of the Strategic Partnership, Australia and India issued a Joint Declaration on Security Cooperation that will see the two countries intensify their efforts to maintain peace, stability and prosperity and put in place mechanisms to ensure closer and more regular collaboration in security areas. Mr Rudd unveiled a major increase in the diplomatic resources Australia devotes to the India relationship, including new positions in Delhi, new DFAT positions in Mumbai and Chennai, and new Austrade offices across Indian regional cities. Mr Rudd also announced a major boost in funding over five years for joint science and technology research projects. This includes $65 million that will be matched by India for the Australia-India Strategic Research Fund to support joint research in some of the challenges facing the two countries, like energy, food and water security, and $20 million for the Australian Centre for International Agricultural Research (ACIAR) to undertake joint research in dry-land agriculture with India. The Australian Government also provided $1 million to support a joint solar cooling and mini-grids project being undertaken by India's The Energy and Resources Institute (TERI) and Australia's Commonwealth Scientific and Industrial Research Organisation (CSIRO).

Prime Minister Julia Gillard made a state visit to India from 15-17 October 2012. The Prime Minister and Indian Prime Minister Singh welcomed the progress that has been achieved and reaffirmed their commitment to the Strategic Partnership. The two Prime Ministers have agreed to hold annual meetings, either bilaterally or in the margins of international summits they both attend, and announced deeper bilateral co-operation across a range of issues. Their joint statement is available here.

Official visits

Since 2008 there have been an unprecedented number of two-way visits, with 26 high-level Indian visits to Australia and 39 Australian visits to India, including visits by then Prime Minister Rudd in 2009 and Prime Minister Gillard in 2012.

Australian and Indian Foreign Ministers meet annually for the India-Australia Foreign Ministers' Framework Dialogue (FMFD) alternatively in Australia and India. Similarly, Australian and Indian Trade Ministers meet annually for the Joint Ministerial Commission (JMC) and Education Ministers for the India-Australia Ministerial Dialogue on Education Cooperation.

Treaties and Memoranda of Understanding

Cooperation between India and Australia spans a range of areas. Notable areas of cooperation include Treaties and Memoranda of Understanding (MoUs) on Air Services; Civil Space Science, Technology and Education; Combating International Terrorism; Customs; Defence Cooperation; Extradition and Mutual Legal Assistance in Criminal Matters; Intellectual property; Skills Training Cooperation; Student Mobility and Welfare; Water Resource Management; and Wool and Woolen Products.

Energy and minerals

A central element of India's foreign affairs agenda is 'energy diplomacy', which relates to the need to secure energy supplies to meet rapidly growing industrial and consumer demand. Australia is well positioned to partner with India in this regard, through exports of minerals and fuels, energy investment opportunities in Australia and collaboration on areas of joint interest, such as new mining technologies. The Joint Working Group on Energy and Minerals was established in 1999. Regular meetings have generated several initiatives designed to deepen the bilateral energy and resources relationship. In addition the inaugural Australia-India Energy and Minerals Forum, which took place in Perth in June 2010, brought together business representatives and government officials from both sides, with Indian Power Minister Sushil Kumar Shinde leading the Indian delegation.

During the visit of the Minister for Resources, Energy and Tourism in November 2008, five Action Plans were signed with the Indian Ministries of: Coal; Mines; New and Renewable Energy; Petroleum and Natural Gas; and Power. The Action Plans are designed to underpin our bilateral engagement and technical cooperation on minerals and energy including trade and investment facilitation. They were updated in May 2011, when Australia and India also launched a Resources and Energy Security Dialogue.

During the recent Prime Ministerial visit it was agreed energy cooperation would be deepened via an annual Ministerial-level dialogue, to be led by the Deputy Chairman of the Planning Commission of India and the Australian Minister for Resources and Energy.

The Australian Government, following a change in Labor Party policy, is putting in place arrangements that would enable the export of uranium to India. It was announced in October 2012 that negotiations on a bilateral Civil Nuclear Cooperation Agreement would soon commence. This is a pre-requisite for sales of uranium from Australia to any other country.

Australia and India also announced a Water Technology Partnership to promote closer collaboration on the common challenge of managing scarce water resources. The Partnership includes the sharing of advanced Australian modeling work on river basin flows.

Education

Education is an area of increasing importance to the bilateral relationship. Australia is a major destination for Indian students studying abroad, who recognise the high quality and cost competitiveness of Australian education services. There were 37,400 Indian students studying in Australia as at the end of March 2012: India was the second largest source country for overseas students in Australia, after China.

Australian Governments at all levels have taken action to ensure the safety of all international students studying in Australia. The Indian Government has expressed acknowledgement and appreciation of the steps Australia has taken in doing so.

Australia and India have also instituted a program of closer cooperation on education matters. Since 2009, education ministers have met annually for the India and Australia Ministerial Dialogue on Education Cooperation. The result of such meetings include the signing in October 2012 of the Memorandum of Understanding on Cooperation on Student Mobility and Welfare to share initiatives which further enhance the international student experience and strengthen the monitoring of education agent activities; and an Australia-India education links website launched by the Minister for Tertiary Education, Skills, Jobs and Workplace Relations, Senator Chris Evans and then Indian Minister of Human Resources Development, Kapil Sabil in August 2011. The website will act as a central information portal to support education and training collaboration between Australian and Indian institutions.

The inaugural meeting of the Australia India Education Council was held in New Delhi on 2 August 2011. Under the AIEC, Australia and India agreed to build partnerships between India's Sector Skills Councils and Australia's Industry Skills Councils in key industry areas. Australia also sponsors the Endeavour AIEC Research Fellowships, which will support two fellows per year

On 31 July 2011, the first Vice-chancellors and Senior University Executive workshop was held in New Delhi, hosted by the University Grants Commission. Eleven Vice-Chancellors from India and twelve Vice-Chancellors/Deputy Vice-Chancellors and Senior University Executives from Australia attended.

To further university collaboration, Indian Prime Minister Singh announced the Indian Council for Cultural Relations would establish Chairs of Indian Studies in five Universities in Australia to promote academic and student exchanges.

Australia-India Council

The Australia-India Council (AIC) was established in 1992 by the Australian Government to broaden the bilateral relationship through increasing levels of knowledge and understanding between the peoples and institutions of Australia and India. The AIC comprises a board of members with interests in the Australia-India relationship, drawn from a cross-section of the Australian community. The AIC is serviced by a secretariat located in the Department of Foreign Affairs and Trade in Canberra. The Australian High Commission in New Delhi manages the AIC's activities in India.

Further information on the Australia-India Council (AIC)

Community presence in Australia

According to the 2011 census 295,362 persons declared their country of birth was India (or 1.4 per cent of the total population, double the number at the 2006 census). It is estimated that around 450,000 persons of Indian descent are currently living in Australia.

Economic and trade relationship

The Australia-India economic relationship has grown steadily in recent years. Australia's strength in exporting primary products, particularly minerals and fuels as well as services like education, positions us well to supply growing Indian industrial and consumer demand.

There are still major barriers to trade with India, despite recent reforms. The IMF highlighted the importance of continued tariff reduction and the lowering of administrative barriers to trade. Indian tariff rates and trade barriers more generally remain among the highest in the world. In addition to tariffs, India imposes various duties, such as safeguard and anti-dumping duties, and non-tariff restrictions such as import bans and standards or certification agreements.

India has gazetted Australia as a reciprocating territory under its Arbitration and Conciliation Act. As a result, arbitral awards made in Australia will now be recognised by the Indian legal system.

Two-way goods and services trade totalled $20.3 billion in 2011.

Major Australian goods and services exports to India
Major Australian exports 2011 (A$m)
Coal 7,221
Gold 4,043
Education 1,637
Copper ores and concentrates 1,426
Crude petroleum 545
Major Australian goods and services imports from India
Major Australian imports 2011 (A$m)
Tourism 493
Diamonds 153
Medicaments 124
Jewellery 111
Telecom.Computer and information services 105

In 2011-12, Australia's goods exports to India totalled $13.1 billion, or 5.0 per cent of total goods exports, making India our fourth largest goods export market. Australia imports a diverse range of goods from India, with total goods imports equalling $2.5 billion in 2011-12. Australia exported $2.1 billion in services to India in 2011, primarily comprised of education exports with India the second largest source of international students studying in Australia. Australia imported $726 million in Indian services in 2011. As of 2011, the total stock of Australian investment in India totalled $4.3 billion, with Indian investment in Australia equalling $11.0 billion. Australian investment in India covers a range of sectors, including manufacturing, telecommunications, hotels, minerals processing, food processing, oil and gas, and the automotive sector. There has also been strong Indian interest in investing in Australian resource deposits.

The top Indian software firms – Tata Consultancy Services, Satyam, Infosys, Pentasoft and HCL – are represented in Australia and have a small but growing market presence.

Australia-India Comprehensive Economic Cooperation Agreement (CECA)

On 12 May 2011, Trade Minister Craig Emerson and Indian Minister for Commerce and Industry Anand Sharma formally launched negotiations to conclude a Comprehensive Economic Cooperation Agreement (CECA) between Australia and India.

Independent modelling conducted in 2008 for a preceding study indicates that an Australia-India CECA could result in a net increase in Australia's GDP by up to US$32 billion (A$45.5 billion) and India's GDP by up to US$34 billion (A$48.3 billion) over a period of 20 years.

Further information on the CECA

Australia-India Chief Executive Officers' (CEO) Forum

The second meeting of the Australia-India CEO Forum took  place in New Delhi on 16 October.  It produced a report on practical ways to enhance trade and investment cooperation, including specific proposals in the transport sector, on skills development and infrastructure projects. The Forum also announced the appointment of two Investment Champions, to help prospective investors navigate through our respective systems. The Australian Champion, Ms Kylie Bell, is Austrade's Investment Commissioner for South Asia. (contact: Kylie.Bell@austrade.gov.au) The Indian Champion, Mr Dushyant Thakor, is General Manager of Invest India. (Contact: dushyant.thakor@ficci.com).

The Forum is a mechanism for business to engage directly with Government on ways to build the bilateral trade and investment relationship. The Forum held its first meeting in New Delhi in March 2012.

Further information on investing in Australia, www.investindia.gov.in

Australian trade and investment strategies

Institutional structures for trade promotion

Australia-India Joint Ministerial Commissions (JMC) are held regularly, enabling interaction at a government and business level on a range of issues. The JMC is held concurrently with a joint meeting of the India-Australia Business Council and the Australia-India Business Council (AIBC). The AIBC is a key Australian body for promoting business links between Australia and India. There are also working groups in specific areas, such as the Joint Working Group (JWG) on Energy and Minerals, and JWGs on Science and Technology, Education, and Tourism.

Updated December 2012